The IRS is becoming more cooperative than ever. In the current economy, the IRS is willing to offer delinquent taxpayers various options for tax debt relief. However, they remain focused on collecting as much tax debt as possible. It is beneficial to consult with a tax attorney who is skilled in negotiating with the IRS. Frequently, a reduced settlement amount can be reached and/or penalties and fines can be forgiven. An experienced tax attorney is aware of all IRS programs for which you may qualify. Attempting to deal with the IRS without representation can subject a taxpayer to paying more than necessary, or accepting an unreasonable payment plan.
IRS Options for Paying Back Taxes
The IRS offers several opportunities to settle tax liabilities. To determine if a taxpayer will qualify for tax debt relief, the main consideration is their financial condition. A qualified tax attorney is your best advocate for guiding you in accepting the right settlement, and for protecting you from disclosing unnecessary information to the IRS that could be detrimental to your case. IRS programs for paying back taxes fall into two categories:
- You can enter into an agreement to settle your back tax debt for less than the amount owed, or
- If the tax liability cannot be reduced, you can apply for special consideration regarding the full amount due.
SETTLING TAXES FOR LESS
Offer in Compromise (OIC) – The OIC is the most sought-after settlement method by taxpayers, but it is also the most difficult for which to qualify. OIC gives the IRS authorization to reduce outstanding tax liabilities, including interest and penalties, for less than the full tax due. The burden is on the taxpayer to convince the IRS that the amount demanded could never be collected from you and would force you into financial hardship.
Penalty Abatement – Taxpayers may request the elimination or reduction of IRS imposed penalties. Key to a favorable outcome is the taxpayer’s ability to convince the IRS of a sound reasonable cause for failure to follow tax laws. A few examples of “reasonable cause” are:
- Death or serious illness
- Destruction of tax records by any casualty
- Unavoidable absence of the taxpayer
- Inability to determine tax amount for reasons beyond taxpayer control
- Lack of funds – acceptable only if the taxpayer can support solid proof of prudent financial management
Partial Payment Installment Agreement (PPIA) – A taxpayer may qualify for a reduction of the total tax liability initially owed the IRS. The taxpayer must be able to provide financial proof they cannot make the minimum monthly payment required by the IRS. A PPIA agreement with the IRS can then be negotiated to pay the reduced amount over a period of time.
SETTLING TAXES FOR THE FULL AMOUNT
Guaranteed Installment Agreement (GIA) - If your assessed tax liability is $10,000 or less, you may qualify for a GIA without IRS financial analysis or IRS manager approval. The taxpayer must be able to pay the tax debt in full within three years, and must not have had an IRS Installment Agreement during the previous five years.
Streamlined Installment Agreement (SIA) – If your assessed tax liability does not exceed $25,000, you may be able to negotiate for an SIA, and bypass the IRS financial analysis and manager approval. The taxpayer must be able to fully pay the tax debt over the next 60 months.
IRS Installment Agreement (IA)- Requests for Guaranteed or Streamlined Installment Agreements that do not meet IRS qualifications will be placed under intense financial scrutiny. The IRS will require all information regarding your assets, liabilities, income and expenses. The approximate time limit for an IA is 5 years. If the assessed tax liability cannot be paid within 5 years, another tax debt relief plan should be considered. IRS negotiations at this level are better handled by an experienced tax attorney to represent the taxpayer’s best interest. NOTE: Before any IRS installment agreement can be considered, the tax payer (a) must have filed all tax returns due, and (b) must file and pay all tax returns during the agreement.
CURRENTLY NOT-COLLECTIBLE (CNC) STATUS
The IRS may determine a tax liability to be Currently Not-Collectible and defer collection action due to “hardship”. You will continue to owe the back taxes, and penalties and interest will still accrue. The IRS will periodically review your income and expenses watching for financial improvement, but further collection activity will be suspended. A few of the reasons a case may be marked as CNC include:
- Collection of back taxes would cause undue hardship for the taxpayer, leaving no room to meet necessary living costs
- Death of a taxpayer with minimal assets
- Special action, i.e. military assignment in a combat zone, or incarceration
- Catastrophic illness, personal or family
- Bankruptcy or suspension of business with no remaining assets
You Need Qualified Representation
Our professional tax team at Instant Tax Solutions can represent you in IRS negotiations for tax relief . We have been very successful in obtaining favorable back tax relief and resolutions for our clients. Call us today at 1-888-366-4117 for a free consultation with a qualified Tax Attorney.